2019 (2) TMI 801 - AT - Income Tax

Tribunal orders fresh assessment due to lack of proper verification by CIT (A)

ITO, Ward 18 (4) New Delhi Versus M/s Yadu Steels And Power Pvt. Ltd.

ITO, Ward 18 (4) New Delhi Versus M/s Yadu Steels And Power Pvt. Ltd. - TMI Issues Involved:Appeal against deletion of addition of share application money - Failure to submit confirmations from parties - Non-compliance with statutory notices - Onus on assessee to prove identity, creditworthiness, and genuineness of transactions - Lack of proper verification by CIT(A) - Setting aside the issue for fresh adjudication.Analysis:Issue 1: Deletion of Addition of Share Application MoneyThe appeal was filed by the revenue against the deletion of the addition of share application money by the Ld. CIT (A). The Ld. AO had disallowed the amount of Rs. 3,52,50,000 received as share application money by the assessee due to non-compliance with providing confirmations from the parties involved. The Ld. CIT (A) deleted the addition, stating that the assessee had submitted additional evidence such as share application forms and identity documents of shareholders, which were accepted without proper verification. The Ld. CIT (A) directed the Ld. AO to make necessary inquiries regarding the genuineness of the shareholders. However, it was observed that the Ld. AO did not conduct any such inquiries, and the Ld. CIT (A) failed to verify the documents filed by the assessee. The Tribunal found that the Ld. CIT (A) had passed the order without proper verification of facts and reversed the decision, setting aside the issue for fresh adjudication.Issue 2: Failure to Submit Confirmations and Non-ComplianceThe Ld. AO issued notices to the directors of the assessee, requesting details of the alleged share application money received. However, there was no compliance from the assessee's side, leading to the Ld. AO passing an ex parte order. The Ld. AO made the addition of the share application money in the hands of the assessee as income from undisclosed sources due to the lack of explanation regarding the credit entries and non-compliance with statutory notices. The Tribunal noted that the onus is on the assessee to prove the identity, creditworthiness, and genuineness of transactions under Section 68 of the Income Tax Act. It was emphasized that both the assessee and the AO should adopt a reasonable approach in such cases.Issue 3: Lack of Proper Verification by CIT(A)The Tribunal highlighted that the Ld. CIT (A) did not conduct proper verification of the documents submitted by the assessee, including share application forms and identity proofs of shareholders. The Ld. CIT (A) accepted these documents without making necessary inquiries or issuing summons under Section 131. The Tribunal found that the Ld. CIT (A) failed to ascertain the nature of the transaction and deleted the addition without adequate verification, leading to the reversal of the decision.In conclusion, the Tribunal allowed the appeal by the revenue for statistical purposes and set aside the issue of the addition of share application money for fresh adjudication by the Ld. AO. The Tribunal directed the Ld. AO to conduct thorough inquiries based on the documents provided by the assessee and follow due process of law to decide the issue afresh.